Exploring the tension between individual rationality and collective welfare through iterated games, public goods, and Ostrom's design principles for governing the commons.
Agents play iterated Prisoner's Dilemma using various strategies. In Axelrod's famous tournament, Tit-for-Tat consistently won -- demonstrating that being nice, retaliatory, forgiving, and clear leads to evolutionary success.
| # | Strategy | Score |
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Individual rationality says "defect" -- but mutual cooperation beats mutual defection (3,3 vs 1,1). In iterated games, the "shadow of the future" enables cooperation through reciprocity.
"Be nice, be retaliatory, be forgiving, be clear. Tit-for-Tat wins not by beating anyone, but by eliciting cooperation -- it never scores higher than its opponent in any single match, yet wins the tournament overall."
N players each decide how much to contribute to a public good. Contributions are multiplied by factor m and shared equally. The dominant strategy is to free-ride, but universal free-riding produces the worst collective outcome -- the fundamental tension of collective action.
Each player has an endowment and decides how much to contribute to the public pot. The pot is multiplied by m (where 1 < m < N) and split equally among all players regardless of contribution.
"Collective action problems are many-player Prisoner's Dilemmas: each person has an incentive to defect, but collectively, everyone does better by cooperating. The key is designing institutions that align individual incentives with group welfare."
A shared resource (fishery) regenerates over time but can be depleted if total harvest exceeds the regeneration rate. Without governance rules, individuals over-exploit the commons. Elinor Ostrom showed communities can self-govern through design principles.
The resource grows logistically: Growth = r * Resource * (1 - Resource/K). Without governance, each harvester takes more than their sustainable share.
"Elinor Ostrom won the Nobel Prize by showing that communities can self-govern shared resources without privatization or top-down regulation -- through clear boundaries, monitoring, graduated sanctions, and collective choice. The tragedy of the commons is not inevitable."